Correlation Between BACKBONE Technology and ENSTAR GROUP

Can any of the company-specific risk be diversified away by investing in both BACKBONE Technology and ENSTAR GROUP at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining BACKBONE Technology and ENSTAR GROUP into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between BACKBONE Technology AG and ENSTAR GROUP LTD, you can compare the effects of market volatilities on BACKBONE Technology and ENSTAR GROUP and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in BACKBONE Technology with a short position of ENSTAR GROUP. Check out your portfolio center. Please also check ongoing floating volatility patterns of BACKBONE Technology and ENSTAR GROUP.

Diversification Opportunities for BACKBONE Technology and ENSTAR GROUP

-0.61

Correlation Coefficient

BACKBONE Technology  ENSTAR GROUP

Excellent diversification

The 3 months correlation between BACKBONE and ENSTAR is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding BACKBONE Technology AG and ENSTAR GROUP LTD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ENSTAR GROUP LTD and BACKBONE Technology is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on BACKBONE Technology AG are associated (or correlated) with ENSTAR GROUP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ENSTAR GROUP LTD has no effect on the direction of BACKBONE Technology i.e., BACKBONE Technology and ENSTAR GROUP go up and down completely randomly.

Pair Corralation between BACKBONE Technology and ENSTAR GROUP

Assuming the 90 days trading horizon BACKBONE Technology AG is expected to generate 6.72 times more return on investment than ENSTAR GROUP. However, BACKBONE Technology is 6.72 times more volatile than ENSTAR GROUP LTD. It trades about 0.21 of its potential returns per unit of risk. ENSTAR GROUP LTD is currently generating about -0.09 per unit of risk. If you would invest  1.20  in BACKBONE Technology AG on April 25, 2025 and sell it today you would earn a total of  0.80  from holding BACKBONE Technology AG or generate 66.67% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	77.78%
Values	Daily Returns

BACKBONE Technology AG  vs.  ENSTAR GROUP LTD

BACKBONE Technology

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in BACKBONE Technology AG are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, BACKBONE Technology unveiled solid returns over the last few months and may actually be approaching a breakup point.

ENSTAR GROUP LTD

Risk-Adjusted Performance

Very Weak

Over the last 90 days ENSTAR GROUP LTD has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, ENSTAR GROUP is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with BACKBONE Technology and ENSTAR GROUP

The main advantage of trading using opposite BACKBONE Technology and ENSTAR GROUP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BACKBONE Technology position performs unexpectedly, ENSTAR GROUP can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in ENSTAR GROUP will offset losses from the drop in ENSTAR GROUP's long position.

The idea behind BACKBONE Technology AG and ENSTAR GROUP LTD pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

Check out your portfolio center.

Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.